(Daniel W. Ambaye
This Article which is written in English and Amharic, first appeared on the Reporter newspaper. It was suggested to me by the writer himself. The writer is a lecturer at the Institute of Land Administration, Bahir Dar University)
The New Land Lease Proclamation: Changes, Implications
The House of Peoples Representatives has passed a new urban lease holding proclamation in October 2011 that is termed as Proclamation 721/2011. This proclamation repeals the previous urban land lease holding proclamation no. 271/2002. The new proclamation has introduced some new and controversial articles which generate lots of discussions among the people and government officials.
Daniel Weldegebriel Ambaye tries to investigate the basic contents of the major changes introduced and the possible implications thereof.
Background and objectives of the proclamation
Before the revolution, urban land was held in Ethiopia in private ownership. When the Derg came to power in 1974, it passed a proclamation (47/1975) that transferred all urban land and extra houses to government ownership. Land owners lost their land without compensation and land was not subject to sale, mortgage, donation, lease and so on. Urban residents were allowed to keep one residential house and another business house, if necessary. Those who had no house at that time were allowed to get a land not more than 500 square meters to construct one. And those who had no ability to do so were given government houses on rental basis.
When the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) led government assumed power in 1991, it designed a new tenure system for urban Ethiopia. Leasehold as land tenure system was then introduced in the country in 1993. Leasehold as a form of land tenure is a well known system applied in many other countries of the world as well. In Ethiopia, for the first time, it was introduced in 1993; then revised in 2002; and finally again being repealed today in 2011. The first and usual objective of any leasehold system is to collect enough capital money in the form of ground rent to finance the urban infrastructure systems. This is indeed the sole reason for many western countries and capitals. The second reason, prevailing in former socialist countries, which still do not privatize their urban land, is that lease serves as a means to transfer land use rights from government ownership to individual citizens. It is a temporary means to satisfy the need of land demand through lease agreements. Countries may have their own ideological, economic, social and political reasons to keep land in the ownership of the state.
In Ethiopia the objective of the previous lease proclamation 272/2002 was twofold, to collect enough money to run urban infrastructure and to transfer all urban land holdings in to lease system. Indeed as witnessed then after, the government had shown efforts to create a source of revenue for the purpose of financing the supply of dwelling houses and infrastructure through an effective and dynamic land lease policy. Moreover, large cities and towns, designated by federal and states as lease towns, faithfully practiced the second objective-urban land has been transferred to individuals by lease agreement. Now; however, it becomes clear that urban municipalities become corrupt and inefficient in land delivery. Demand for land in urban areas has been greater in huge amount than the supply of land given by the land authorities. Besides, corruption, non-transparency and injustice have reined in the system, which created a safe haven for few urban speculators and brokers. Urban speculators profited by selling bare land without adding value to it. Government has been complaining that it was not the beneficiary of the share of the profit reaped by the above agents. For this reason, the FDRE government initiated the revision and enactment of new urban land lease proclamation. Again, when we see the objectives of this new proclamation, as envisaged in the preamble, are two: to satisfy the growing urban land demand resulted because of the fast economic growth of the country; and to ensure good governance for the development of efficient land market and a transparent and accountable land administration system.
Conversion of old possessions to leasehold
The proclamation clearly declares that all land in urban areas shall henceforth be transferred in to lease system. Although many people are surprised by such measure, this idea was from the beginning, incorporated in the previous proclamation. It emphasized that lease system would be the cardinal landholding system in the country. The difference between the previous and the current proclamation is that the current lease proclamation attaches mandatory lease payment to the status. Transfer of land holding into lease system means that all land in urban areas, after being identified and registered by the municipality, shall be named as lease land and the holder shall enter with the government a lease contract that, among others, includes lease period and lease price to be paid. The lessee will then after be issued a “lease certificate” that shows name of lessee, land size, location, land use purpose, lease price, lease period and so on.
Although the timing of transferring all “old possessions” which were acquired during the Derg era and before as well as those acquired then after through informal means is not yet decided, the proclamation declares that lease payment would be made in the event of the following three situations: when land is transferred to a third party via a modality other than inheritance (e.g. sale, donation, and exchange), when old possession and newly leased land are amalgamated/merged, and when informal settlement land is being regularized.
The effect of transfer of land right or status of landholding in the event of the above three situations is that people will pay “lease benchmark price” (minimum lease price), which shall be set by every urban center, multiplied by the area of the land size. The calculation of this price takes into “account the cost of infrastructural development, demolition cost as well as compensation to be paid to displaced persons in case of built up areas, and other relevant factors”. According to an interview of a government official given recently for the Amharic Reporter, for example, the maximum “benchmark” lease price fixed for Addis Ababa is 600 birr. It means there are other lesser prices for other lower graded areas in the city. Hence, a person, who would like to buy a house built on 200 square meters area, will pay (200 x 600) 120,000 birr lease price. The initial payment will be no less that 10 percent and the remaining will be paid over a long period of time that shall be decided in the contract.
The concerns of the general public are whether or not land holders [old or new] would pay for their holdings even though there is no transaction of the sort. In other words, could they be surprised edby a load of debt of lease price without any activity of the above sort? The proclamation says that it should be decided after a thorough research is conducted in the coming four years. So, at least, it will not be a concern for now.
Modes of land acquisition
Previously, as mentioned by the federal and state lease laws, there were four means of urban land acquisition: auction, negotiation, assignment and lot. Now, since most of them open a door for corruption, the law recognizes tender (auction) and allotment (land lease transfer without auction) as the only two basic means of leasehold right transfer from government to citizens. As a matter of principle, every land needed for residential, business (agriculture, industry, or service), and others will be transferred by tender. Bidders will use the minimum lease price mentioned above as a base to offer their price. However, as exception, city municipalities may give land by allotment to selected areas of paramount importance to society such as government offices, religious institutions, public residential housing programs, diplomatic mission and so on. Besides, a person, who is displaced from his house as a result of urban renewal (like in case of expropriation), shall get land by allotment. All except the last would pay lease price based on the benchmark set by the city.
Related article by Daniel w. Ambaye
- Ethiopian Urban Land Lease Law (the previous!) (chilot.wordpress.com)